The European Banking Authority (EBA) published a report setting out the medium- to long-term objectives of its interest rate risk in the banking book (IRRBB) Heatmap, completing the remaining milestones from the roadmap established following its IRRBB scrutiny. The report provides an analytical review with observations and recommendations intended to support institutions’ practices and supervisory dialogue, to be applied proportionately, and it does not introduce new regulatory requirements. Key messages cover supervisory outliers test (SOT) results, which point to banks’ gradual adjustment to the new interest rate environment with fewer outliers across both metrics, while changes in economic value of equity (ΔEVE) and net interest income (ΔNII) remain asymmetrical. On the 5-year cap, the EBA notes it continues to act as a harmonising benchmark with limited impact so far and recommends that deviations from the supervisory default be approved by supervisors and disclosed under Pillar 3. The report also highlights that constant-spread commercial margin modelling remains common except for non-maturing deposits, and that guidance for non-maturing deposits should only be extended to products where behavioural characteristics are material. For credit spread risk in the banking book (CSRBB), heterogeneous perimeter practices are observed and institutions are encouraged to work towards a consistent perimeter across ΔEVE and ΔNII and avoid excluding instruments ex ante. On hedging, interest rate swaps remain the main tool for mitigating IRRBB exposures, especially for ΔEVE SOT breaches, and expectations are set around hedge designation aligned to product characteristics, governance of economic-hedging frameworks, and evidence of effectiveness through regular back-testing and documentation. Ongoing monitoring of IRRBB implementation remains part of the EBA’s supervisory work to promote consistent application of EU law and common supervisory approaches, alongside the strengthened IRRBB framework under Commission Delegated Regulations (EU) 2024/856 and 2024/857 and Commission Implementing Regulation (EU) 2024/855, and the EBA Guidelines on IRRBB and CSRBB that have applied since 31 December 2023.
European Banking Authority 2026-01-26
European Banking Authority publishes report completing medium to long term IRRBB Heatmap milestones and recommendations
The European Banking Authority published a report outlining medium- to long-term objectives for its interest rate risk in the banking book Heatmap, completing its IRRBB roadmap milestones. The report reviews supervisory outliers test results, economic value of equity and net interest income asymmetries, and provides recommendations on hedging and credit spread risk practices, without introducing new regulatory requirements.